The Truth About Short Sales

With the rise in the foreclosure rate, short sales are becoming much more attractive to mortgage lien holders than they have been in the past. I have outlined what a short sale is in my article “Foreclosures are up – What to Do” so I won’t be repetitive in this article. In a nutshell, a short sale is when the lender agrees to take less than what is owed on the home as “payment in full.” A short sale is a win/win situation for everyone involved, here’s why:

To You the Seller – You will be able to avoid foreclosure and sell your home at no cost to you.

To the Mortgage Company – They are not in the real estate business, they are there to lend money, so they really don’t want your house. They are minimizing their losses therefore they want to help bridge the gap.

To the Buyer – They get a good investment on a home. These are not typically good deals for investors because of the loan and property ownership limits imposed by regulatory agencies such as FHLMC/FNMA.

With that being said, just because someone is a real estate agent does not mean they know how to successfully handle a short sale transaction, and this can be disastrous. A Realtor is required by the lender in handling a short sale, but the knowledge of the Realtor regarding short sales is critical and few actually know how to take it all the way through. You do not want someone “feeling” their way through. Make sure you retain a professional.

Following are 5 keys to a successful short sale:

Know the process involved in shorting a loan, not just part of it. Anything that is out of place can cause long delays and ultimately cause the deal to fall through, leaving you back where you started, only in worse shape and frustrated.

Know what the lenders require for different types of loans such as FHA or Conventional and put it in a format that will get their attention. Lenders receive thousands of requests for short sales, and if the packet is in any way incomplete, it goes into the big stack of files to be dealt with if there is enough time. Whereas, if the packet is complete and in their format, it goes into the small stack that gets dealt with quickly.

Know what the banks have to “net” on the sale. There is a way to know exactly what they will take or not take on the loss, not just sending them an offer and hope they take it. This may work on actual foreclosures, but not on short sales. There is a formula, and if your Realtor does not know it, your house will not be priced right and again, there will be much frustration.

Know what the banks will approve in the purchase offer. Will they pay closing costs, repairs, etc.? Again, if you submit something to them they will not allow, it goes back into the big stack. Have an established alliance with the loss/mitigation representatives. Knowing which representatives will get the deal done and not drag it out can be invaluable. These agents are often paid per file, so they obviously like the files that are a “slam-dunk” for them and will get them out faster.

One last thing you should know would be the three stages of the Pre-Foreclosure period. Default: this can be as little as a month, but typically 3 to 5 months. You will be getting letters saying “you are late, please pay.” Acceleration: this is usually a 20 -30 day stage, and you will get a letter called an intent to accelerate. This basically says to pay all your late pays or we will accelerate. Foreclosure: this is the final stage. It is 21 days long. The foreclosure can be stopped with a short sale, but the longer it goes, the less likely it is to happen.

In summary here are the things to know: Timing is critical; don’t procrastinate hoping things will change. You are not alone. Get someone with short sale training to help you. If you find yourself in this situation and have more questions, I will be glad to consult with you. If you abide by these rules, you stand a much better chance at a safe landing.

The Tobacco Box

If you are in need of a place to escape for an hour or two and you like cigars, sports, good camaraderie and possibly an adult beverage, then I have the place for you. The Tobacco Box has locations in both Rockwall (2787 Ridge Road) and Rowlett (8809 Lakeview Parkway). They are owned and operated by Bill Heard and Gary Fisher. Both have extensive knowledge in helping you choose the right cigar for the right occasion and are more than willing to give personalized attention to your choices. Having been open since 2002, The Tobacco Box has earned the reputation as having one of the best cigar shops and finest selections in the Metroplex.

As you walk in, you are sure to be greeted by either the owner or one of their sons.  After exchanging a few barbs with either of them, make your way past the art laden cigar lounge and the walk-in humidor to a private locker to pick out a cigar for the day. You may choose to buy a soda or engage in a draft beer or scotch. Both are available to cigar club members at no charge (contributions are appreciated). Then plop down in one or the leather chairs, greet your buddies and check out ESPN or Fox News on the 50” plasma television in the lounge area to discuss what will make the world right for today. If you need to catch up on email, complimentary WiFi is available to members as well. Speaking of the cigar club, did I mention the best part? It’s Free! How good is that? There are guys there from every walk of life from truck drivers to attorneys and all seem to share a common bond, fine cigars. There is the occasional celebrity in the cigar world stopping in to say hello from time to time as well such as Kinky Friedman, the Padrons and Avo Uvezian.

If you are in the area, stop by and see Bill or Adam in Rockwall or Gary and Eric in Rowlett, mention you read about them on my website and they will give you their David Ray special which is buy 3 cigars and get the fourth free.

You may have a favorite story about your experience at the Tobacco Box. If so, please feel free to leave your comments in the space below to share with others.

7 Ways to Avoid Mistakes and 3 Things to do when you do

Nothing slows down productivity like a mistake. We all make them, and we all hate having to spend the time and effort going back and correcting them. Here are 7 simple things you can do right now that will help you avoid making another mistake.

Slow Down
Even though we have so much technology in place to help us, it seems as though we are always in a hurry to complete one project and move on to the next. What happens is that we get so caught up in what we are planning, that it is so simple to have a careless error in what we are doing right now. When we make an error like this, it is so aggravating to think we could have avoided it by simply slowing down and doing what we knew to do. Read more

So How Do You Really Feel About Foreclosures?

One of the hot topics regarding real estate is foreclosures. Are there really a lot of them and are they a good deal. In a recent online survey by Harris Interactive on behalf of Trulia.com, there are some interesting observations regarding whether you, the buyer, would consider purchasing a foreclosure and of those surveyed whether or not they thought there was any negative aspects involved in purchasing one. Here are the facts.

Interest in foreclosures is on the rise. The amount of searches conducted for foreclosures have more than tripled in the first quarter of 2008, rising by 214%. The survey was conducted in late April of 2008 and shows that over half would consider purchasing a foreclosed home.

Do buyers feel there are negative aspects in purchasing a foreclosed home? Yes, 69% of those surveyed said they believed there were with the negative aspects believed to be 69% cited hidden costs, 35% considered the prospect as risky and 33% mentioed the possibility of the home losing it’s value. These are all valid concerns and should be addressed. The following list of guidelines should help. Read more